Patrick Blakesley KC success in commercial court on insurance coverage dispute
Insurance: judgment on construction of inconsistent terms in a motor policy. ERS Syndicate 218 at Lloyd’s v (1) Motorshifter Ltd (in liquidation) and (2) Allianz Insurance plc  EWHC  (Comm)
The High Court (Adrian Beltrami KC sitting as a deputy) has recently handed down judgment in ERS Syndicate 218 at Lloyd’s v (1) Motorshifter Ltd (in liquidation) and (2) Allianz Insurance plc  EWHC  (Comm).
Motorshifter transported cars and light commercial vehicles round the UK for commercial and private clients, using trade plates. In early 2017 ERS insured the business under a one year trade policy. ERS produced policy documents including a Schedule and a Certificate. The Schedule stated that the class of use covered was “business use of the insured” for vehicles operating under 20 trade plates, and set out the premium calculated by reference only to the number of trade plates. The Certificate, by contrast, stated that limitations as to use were “Use for social, domestic and pleasure purposes and for the business of the policyholder”.
An employee of Motorshifter was driving a customer’s car without showing trade plates and without the apparent authorisation of his employer when he caused an accident in which a ten year old girl suffered catastrophic injuries. It was agreed that he was not driving in the course of the business at the time.
Allianz had also provided coverage in respect of the car under a fleet policy. It was common ground that Allianz was not a contractual insurer but was potentially liable to provide indemnity under s.151 of the Road Traffic Act 1988 if ERS were not the contractual insurer.
ERS issued proceedings for a declaration that on its proper construction its Policy provided cover for business use only and not for the social, domestic and pleasure purposes indicated in the Certificate; alternatively for rectification of the policy to the same effect; so that it would drop down to the status of Article 75 insurer.
The judge held that that on its proper construction the ERS Policy provided cover for business use only. He considered the well-known approaches to construction set out in Investors Compensation Scheme Ltd v West Bromwich Building Society  1 WLR 896, Chartbrook Ltd v Persimmon Homes Ltd  UKHL 38, Rainy Sky SA v Kookmin Bank  UKSC 50, Arnold v Britton  UKSC 36, Wood v Capita Insurance Services Ltd  UKSC 24, and Financial Conduct Authority v Arch Insurance (UK) Ltd  UKSC 1. He rejected Allianz’s argument that the Schedule and the Certificate could be reconciled and that the Schedule could be read as reflecting only part of the cover provided, and for only some of the vehicles intended to be covered. This would be an unlikely and commercially unsatisfactory outcome which would only achieve consistency at the price of commercial certainty. A reasonable reader would not expect to find the fundamental aspects of the Policy spread around separate documents in that way.
He also found assistance in R & S Pilling (trading as Phoenix Engineering) v UK Insurance Ltd  UKSC 16 in which the Supreme Court examined the statutory purpose of a certificate, and its distinction from the remainder of the policy, and concluded that the certificate in that case had certified the legal effect of the policy but did not provide additional insurance cover over what was already set out elsewhere. The judge found that if the Certificate in this case were to provide additional cover, it would have to be clearly expressed because this would exceed the purpose for which it was created by statute.
In resolving the conflict between inconsistent contractual terms the judge found the Schedule to be the operative document defining unambiguously the insured vehicles and the cover which was to be supplied, and had the character of a bespoke document, whereas the Certificate was more generic and the more likely to be erroneous. He construed the Policy in ERS’s favour and granted the declaration sought, so that ERS will not be liable to provide indemnity.
The case will be of use to those faced with inconsistent terms in motor policies in particular, and for examining the comparative potency and effect of the schedule and certificate.
Patrick Blakesley KC successfully acted for ERS, instructed by Mark Walsh of Kennedys.